Since January 1937, Americans have dutifully paid into Social Security trusting that its benefits will be there for them when they retire. Yet, that faith now seems unfounded with Social Security hemorrhaging cash. According to the latest report by Social Security’s Trustees, the program’s combined trust funds will be unable to deliver full benefits in 2034, forcing future beneficiaries to suffer a 21 percent benefit cut. In order for the program to survive, comprehensive reform is necessary.
Earlier this month, Rep. Sam Johnson (R-TX) introduced the Social Security Reform Act of 2016, a bill that aims to prevent the forecasted cuts by implementing a wide series of structural reforms to the program. According to the Social Security Administration’s Chief Actuary Stephen Goss, if the reforms outlined in the bill are implemented, “the combined OASI and DI Trust Funds would be fully solvent…throughout the 75-year projection period.”
There are no new ideas in this bill, nor does it aim to radically change the structure of Social Security. Rather, it’s a plan which would not involve raising taxes. In general terms, the plan outlined in the bill would affect Social Security in two ways: the mechanics of Social Security would be updated to account for modern economic conditions, and the program would further redirect funds towards poorer beneficiaries.
Today’s Young Voices Podcast features Young Voices Executive Director Casey Given and YV Advocate Michael Shindler on why Congress should reform the Social Security Disability Insurance (SSDI) program before it runs out of money.
Roughly nine million Americans currently rely on Social Security Disability Insurance (SSDI). According to the latest annual report by the fund’s trustees, the program is set to be depleted by 2023, at which point it will only be able to pay 89 percent of current benefits.
In October 2015, Congress passed a temporary measure to ballast the SSDI program, allowing it access to about $150 billion in revenues over the next three years from Social Security’s Old-Age & Survivors Insurance (OASI) trust fund. Despite the transfer, the trustees reported that the SSDI program fails the test of short-term financial adequacy since its reserves will remain below its yearly costs over the next decade. And Since Social Security’s OASI program is even more beggared, continued revenue transfers are unviable.
Twenty-two years ago, when Congress similarly siphoned funds from the OASI program to supplement the SSDI program, Social Security’s Trustees cautioned Congress that it needed to reform the SSDI program or it would find itself similarly troubled in 2016. Instead of structural reform, the 114th Congress has employed the same unsustainable measures that were applied before. Yet now, the situation is fundamentally worse. The SSDI program still fails the Trustees’ test of short-term financial adequacy, and the program is expected to require another cash infusion in seven years’ time instead of twenty-two.
Worse yet, the number of SSDI beneficiaries has surged over the past 60 years since the program’s inception. In 1960, 0.5 percent of the working-age population received SSDI benefits. Yet, despite significant improvements in healthcare and technological advancements, the percentage of the working-age population that receive SSDI benefits has climbed to 5.1 percent as of 2014—an increase of over ten times.
See if you can make any sense of the following Trump quote: “If you listen to the Democrats, they want to do many things to Social Security and I want to do them on its own merit. You listen to them, what they want to do to Social Security, none of these folks are getting elected, OK, whether they can do it or not. I’m going to save Social Security. I’m going to bring jobs back from China.” After the rest of his unrelated response, the moderator wisely followed up and asked how he would actually save Social Security. Trump talked about cutting “tremendous waste, fraud and abuse” in the system.
There is fraud in Social Security, but ending that fraud isn’t nearly enough to save the system. The deficit in the retirement trust fund will exceed $60 billion by 2021, with no improvement in sight. Most of that deficit isn’t abuse — it’s structural. There are too many retired beneficiaries depending on too few workers. Trump wants to stick with Social Security’s status quo, but the system needs reforms like a gradual increase in the retirement age or the option to put benefits in a personalized account.
Our system of taxing the young to pay for the old needs reform to reflect 21st century realities.
“We’ve been crippled by Social Security, by Medicare … and that is the root of the problem. Entitlements. Let me be clear: You are entitled to nothing.”
These words come from Kevin’s Spacey’s character Frank Underwood, star of the Netflix political drama “House of Cards.” Harsh though they may be, they’re not without truth: America’s principal health and retirement programs for the elderly, Social Security and Medicare, are placing a massive fiscal burden on its youngest generations and crippling the country with debts that cannot be paid.
While the official national debt sits at a staggering $18 trillion, taking future entitlement spending obligations into account pushes the number beyond the conceivable: $200 trillion. That’s 14 zeroes, over 10 times the official number. The Social Security trust fund is projected to reach insolvency in 19 years, and Medicare will be unable to meet its projected obligations in 15 years. Young Americans are stuck paying into programs that, absent reform, will only partially be there for their retirements – if they’re around at all.
To cover the ballooning costs of these programs, workers in 2050 would have to pay nearly a third of their hard-earned income just to cover payroll tax obligations – over twice the rate paid today. This and other taxes would make it impossible for many workers to save for their own retirements.